LONDON — Part history professor, part marketeer — and all raconteur — Brian Duffy knows that no one needs another bit of bling strapped to their wrist. That’s why he’s overseeing double-digit growth at Watches of Switzerland Group, the largest prestige luxury watch and jewelry specialist in the U.K., and why he’s colonizing the fragmented, underdeveloped U.S. market.
Duffy, a Glasgow, Scotland native, might also be leading Watches of Switzerland to an initial public offering in the not-so-distant future, but there’s a lot to be done in the meantime.
From the Millennials’ fixation with Rolexes, to customers’ propensity to color-coordinate watch dials with outfits, to women’s shifting desire from quartz to mechanical, and the role of The Reformation in watchmaking, Duffy speaks easily to the history, trends and dynamics of the watch market — and then some.
About three months ago, the Watches of Switzerland Group chief executive officer started a podcast series, interviewing guests such as Jean-Claude Biver of LVMH Möet Hennessy Louis Vuitton, François-Henry Bennahmias, ceo of Audemars Piguet, and George Bamford, founder of the Bamford Watch Department. Some 10,000 downloads later, he’s feeling good — albeit skeptical — about the series’ success.
“Probably nobody can understand my accent — and that’s probably why they listen,” he said with a smile.
Watches, Duffy would argue, are a lot more than luxury gadgets or indulgences for the few: “Everybody wants a watch — that’s what we fundamentally believe — and however many you’ve got, you’ll want another. You’ve just got to engage people in that passion,” said Duffy from the polished boardroom above the 18,000-square-foot Regent Street flagship.
Having helped to build the retail group, which has been owned by the private equity firm Apollo Global Management for six years — and which is the U.K.’s largest retailer for Rolex, Patek Philippe, Cartier, Omega, Tag Heuer and Breitling — Duffy and his team have been training their eyes on the U.S. market.
In 2017, Watches of Switzerland purchased and began refurbishing the watch and jewelry retail chain Mayors in Florida, and has also shifted into expansion mode elsewhere. Last week it opened a 6,500-square-foot unit at Hudson Yards, and last year cut the ribbon on an 8,000-square-foot space in Manhattan’s SoHo.
The brand has recently relocated its store at the Wynn in Las Vegas, and plans to open at the Wynn in Boston harbor and in the American Dream mall in New Jersey.
Watches of Switzerland’s aim is to become the market leader for watches in the U.S., “and we’re almost there, which kind of shows you how fragmented the market is,” said Duffy, adding that America is brimming with opportunity.
“Watches appeal to the American psyche as a status symbol, we call it a ‘rational indulgence,’ which means you’re buying a product that contains value. It’s not frivolous, it’s not something that devalues as soon as you buy it. If you buy it wisely it actually can be an investment, so that appeals to the American psyche and a family heirloom appeals, too.”
Duffy added there are other reasons why Watches of Switzerland is bullish on the market. “There is physically not enough retail around. There’s no department store business to talk of, and luxury watches have no airport business. The biggest player today is Tourneau, which was recently acquired by the Bucherer Group, and it’s a positive thing overall.”
He said that, in the midterm, there is also potential for luxury items in U.S. airports, such as San Francisco Los Angeles and New York’s JFK.
The online gray market has dented retail demand in the U.S., although brands have begun cracking down, making room for multibrand e-commerce in America, Duffy said.
In its home market of the U.K. Watches of Switzerland Group, known until last year as Aurum Ltd., has a broader, high-shine portfolio. It also owns the premium luxury jewelers Goldsmiths and Mappin & Webb, and boasts more than 130 outlets, including 13 dedicated mono-brand boutiques in partnership with Rolex, Tag Heuer, Omega and Breitling, and shops at Terminals 2, 3, 4 and 5 at Heathrow Airport. The company operates five online transactional web sites.
In the year ended April 29, 2018, Watches of Switzerland Group revenues rose 21.2 percent to 685.2 million pounds, while pretax profit rose 23.6 percent to 6.9 million pounds. Operating profit in the 12 months rose 35.4 percent to 37.1 million pounds.
In the second quarter of fiscal 2019, revenue rose 29 percent 197 million pounds, driven by organic growth in the U.K. and the U.S., as well as by acquisitions, the company said.
There has been talk of an IPO in London, if and when Apollo decides to exit, and Duffy said he thinks the public markets would be a good home for Watches of Switzerland.
“We haven’t confirmed anything, but I personally think public ownership would be good for a group like this, and I doubt it there is another private owner that’s got the same kind of vision as Apollo,” he said. A trade buyer such as LVMH or Kering would be tricky, however, given the breadth of brands that Watches of Switzerland sells and the conflicts of interest that could potentially arise.
Watches of Switzerland is the U.K.’s largest retailer for Rolex, Patek Philippe, Cartier, Omega, Tag Heuer and Breitling. This year, the company is marking its centenary as the first authorized dealer of Rolex.
Of late, the watch market has been challenging for the brands themselves, with watchmaking behemoths such as Richemont, parent of brands including Cartier, IWC and Van Cleef & Arpels, having to buy back inventory and adjust the output of its specialist watchmakers in response to a slowdown demand, in China in particular.
Although exports of Swiss watches posted robust increases for most of 2018, growth was rockier toward the end of the year, and into 2019. Duffy said that as a retailer entrenched in the dynamic U.K. market, Watches of Switzerland has been shielded from the geopolitical ups and downs that the brands are facing. Still, business remains challenging.
“It’s never easy. You’ve got to keep getting better at what you’re doing — constantly. Traffic to stores is down everywhere, so our answers to that is a wonderful CRM (customer relationship management) system and a real propensity to collect — it’s addictive. Half of the people who are buying one watch are buying more than one. Therefore, when you have a customer who has bought a watch and enjoyed the experience and so on, then clearly it’s a very lucrative audience to keep in touch with, and stimulate,” he said.
Asked about some of the trends he’s seeing, Duffy said the smart watch hasn’t been trampling on traditional watch territory, and that Millennials like the idea of a Rolex.
“With regard to smart watches, only one percent of people who have a luxury watch and who have bought a smart watch regard one as a replacement of the other. Ninety-nine percent of people will wear them both, and have them for different purposes. The purpose of your smart watch is to know how you slept last night, or for medical information. There have always been much more efficient, cheaper ways of telling the time than an expensive watch or a mechanical watch. That hasn’t changed.”
He said the “big technology revolution” that happened in the watch industry was the arrival of quartz in the Eighties. “It decimated the industry, but then led the industry to redefine itself as luxury — and mechanical,” said Duffy, adding that another trend he’s seeing is women moving away from quartz watches to mechanical ones.
“That, to me, is interesting because you are rejecting an Eighties technology in favor of an 18th-century technology. It just demonstrates just how, as humans, we really appreciate craftsmanship.”
He also talked about the power of Rolexes for a younger generation of consumers.
“The whole nature of Swiss watches, of mechanical watches, actually appeals to a Millennial audience. It lasts forever, so it’s not disposable, it comes with stories and with intrigue from brands that have been around since the 18th century. It comes with the intrigue of mechanical things that people can look at and understand,” he said.
“Who didn’t get the Timex when they were seven years old and listen to it, and look at it, and who doesn’t now get a beautiful watch and look at the back of it? So that does appeal to a Millennial audience.”
Duffy ticks off a series of other trends — watches as fashion accessories, watches for dressing up or for dressing down — and it’s clear that he has studied, and continues to study, his consumer — and that he wants to deliver for them, and keep them keen.
“I think good marketing people are born rather than made, and that you really have to be interested in what makes people tick. I often say the one big advantage I have is that I didn’t come from a luxury environment at all. I grew up in the projects in Glasgow and [taking a look at luxury] I would ask myself ‘What is going on here?’”
“Then you do get to understand why people want to spoil themselves, why they indulge in exclusivity, why they have an artistic appreciation for style and craftsmanship, and so on. You have to understand the different motivations for buying, and you have to believe in them. You also have to believe in brand and exclusivity and service and all of these things that really make the luxury market tick,” he said.